Oil prices moved higher during Asian trading on Monday after renewed clashes between the United States and Iran raised fresh doubts about their fragile peace agreement.
However, gains remained limited after reports suggested that both countries had agreed to stop further attacks and resume negotiations in Qatar this week.
Brent and WTI Oil Prices Rise
Brent crude futures for August gained approximately 0.65% to trade at $72.46 per barrel as of 00:10 ET, or 04:10 GMT.
West Texas Intermediate crude futures rose by around 1.2% to $70.07 per barrel.
The increase reflected renewed concern about supply disruptions following the weekend escalation.
US and Iran Exchange Fresh Strikes
The United States and Iran carried out attacks through the end of last week amid disagreements over Tehran’s claim of authority in the Strait of Hormuz.
The renewed hostilities slowed some shipping activity through the strategically important waterway.
As a result, traders added a small geopolitical risk premium back into crude oil prices.
The Strait of Hormuz remains one of the world’s most important energy transit routes. Any disruption to tanker traffic can quickly affect oil supply expectations.
Qatar Talks Limit Oil Price Gains
Oil’s advance was restricted by an Axios report that Washington and Tehran had agreed to halt hostilities immediately.
The two sides are reportedly preparing to hold another round of negotiations in Qatar this week.
Investors are now assessing whether the talks can preserve the interim agreement and prevent another military escalation.
Lebanon Conflict Remains a Major Obstacle
Continuing hostilities between Israel and Lebanon remain an important source of disagreement between the United States and Iran.
Tehran has reportedly demanded that Lebanon be included in any wider peace agreement.
Meanwhile, Israel and Hezbollah continued to clash in southern Lebanon despite repeated international attempts to secure a ceasefire.
The unresolved conflict could complicate negotiations and increase the risk of wider instability across the Middle East.
Oil Recovers From Four-Month Low
Crude prices recovered slightly after recently falling to their lowest level in four months.
The earlier decline followed the signing of an interim US-Iran peace agreement, which encouraged investors to remove much of the geopolitical risk premium from oil prices.
Improving supply conditions also weighed on the market.
Oil flows through the Strait of Hormuz had moved closer to pre-war levels during the previous week, easing concerns about an immediate shortage.
Fragile Peace Deal Keeps Markets Cautious
The weekend attacks renewed concerns about whether the temporary peace agreement can survive.
ANZ analysts warned that the recent sense of calm in the Middle East could face a significant test following the latest exchanges between Washington and Tehran.
Although the US-Iran agreement marked an important turning point for oil markets, physical supply conditions have not yet returned to normal.
Tanker backlogs, damaged infrastructure and temporary production shutdowns continue to restrict oil flows.
Oil Supply Recovery Could Take Months
ANZ analysts said the recovery in global oil supplies is likely to be gradual and uneven.
They warned that it could take until the end of the year for supply conditions to return fully to normal.
Even without further military escalation, existing damage and shipping delays could continue to affect the market.
This means oil prices may remain sensitive to any new developments involving the Strait of Hormuz or regional energy infrastructure.
Crude Prices Fell More Than 10% Last Week
Oil prices dropped by more than 10% during the previous week and returned to levels seen before the conflict.
The sharp decline followed the interim peace deal between the United States and Iran.
Under the agreement, both sides committed to ending their immediate conflict and beginning negotiations toward a more comprehensive settlement.
Wider US-Iran Peace Deal in Focus
Attention is now turning to whether Washington and Tehran can agree on a lasting peace arrangement.
The two countries have reportedly established a 60-day negotiation period to resolve their remaining disputes.
Progress during the Qatar talks could reduce geopolitical risk and place further downward pressure on oil prices.
However, another breakdown in negotiations could revive concerns about shipping disruptions and energy supply shortages.
